Question 16 If the marginal product of labor for a Frm decreases as more workers are hired, we know that: Selected Answer: e. the gains from specialization are exhausted. Question 17 In the accompanying table, diminishing marginal product begins after the: Selected Answer: b. second unit of output. Question 18 If a Frm hires another worker and her marginal product of labor is positive, we know that the Frm’s total output is: Selected Answer: c. increasing. Question 19 Nathan owns a co±eeroasting company. If he increases the size of his company and experiences constant returns to scale as a result, his longrun average total cost curve should be: Selected Answer: b. horizontal. Question 20 In the accompanying table, diminishing marginal product begins after the: Selected Answer: a. fourth unit of input.Version 2Question 1 Lauren is the owner of a bakery that earns 0 (zero) economic proFt. Last year,her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000,
Background image of page 2
Info iconThis preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentRight Arrow Icon
and her overhead expenses were $15,000. From this information, we know that her total implicit costs were: Selected Answer: e. $53,000. Question 2 Use the following scenario to answer the questions that follow. Steve owns a bike store. His total costs are $1.2 million per year, his variable costs are $750,000, and his ±xed costs are $450,000 per year. Last year, Steve sold 1,200 bikes. Steve’s average total cost was __________ per bike. Selected Answer: a. $375 Question 3 It is important for a ±rm to know its minimum e²cient scale of production because that is where: Selected Answer: e. longrun costs are minimized. Question 4 Use the following graph to answer the questions that follow. Which of the curves depicts economies of scale? Selected Answer: a. LRATC1Question 5 In the accompanying table, diminishing marginal product begins after the: Selected Answer: d. fourth unit of input. Question 6 Darrell owns a furniture store. If he decided to expand the size of his store in order to sell more furniture, how would he know if he is experiencing diseconomies of scale? Selected Answer: d. His average cost of selling furniture decreases. (X)Question 7 Ralph owns a small pizza restaurant, where he works fulltime in the kitchen. His total revenue last year was $100,000, and his rent was $3,000 per month. He pays his one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. Ralph could earn $35,000 per year as the manager of a competing pizzarestaurant nearby. His total accounting pro±t for the year was: Selected Answer: a. $34,000. Question 8 Steve owns a bike store. Last year, his average cost of selling a bike was $1,000. If he expands the size of his store this year and sees his average cost remain the same, his longrun average total cost curve should be: Selected Answer: d. horizontal. Question 9 Chief executive o²cers (CEOs) of major corporations are often paid mostly with stock options, as opposed to salaries and cash payments. These stock options often cannot be converted into stock and sold until years after they were issued. All this is ultimately intended to create incentives for the CEO to: Selected Answer: a. increase the value of the stock by maximizing company pro±t.
Background image of page 3